Behavioural economics is seeing something of a vogue, but how useful is the discipline in the long term? David Penn questions the effectiveness of the decision-shapers.
Back in the day, I recall a marketing director at Unilever peering intently at a chart showing a big sales uplift in a particular region and declaring: “Look at that! We must be doing something right there. Find out what it is, and we’ll do it everywhere.”
Pure common sense, you might think, but what underlies the sentiment is a vanity – that marketers and advertisers have the power to bring about change. Now, some change is relatively easy to effect – pricing, distribution, promotions are all levers that can be pulled, relatively fast, and effectively. But one thing you can’t do overnight is to make your brand more attractive. An obvious point, surely, but marketers and advertisers have not always thought that way.
Remember those 60s models of how advertising works? Famously, AIDA (Attention – Interest – Decision – Action), assumed a linear relationship between advertising impact and eventual action; the basic idea being that, to change behaviour, you must first get attention and then lodge a (persuasive) message. What next? Decision and ACTION= SALES!
Persuading people to buy your product is a viable strategy untilyou run out of (persuasive) things to say – and, in many categories, that is more or less what happened from the 60s onwards. As markets matured and product differentiation lessened, marketers found it increasingly difficult to work to a persuasion strategy.
So advertisers gradually stopped talking about so-called rational benefits, and started to focus on making brands emotionally attractive. And by the noughties every marketing, advertising and MR conference featured speakers quoting Damasio and extolling the power of emotion (or ‘engagement’) as a driver of brand success.
Problem was, it was probably never made clear enough what marketers and advertisers were supposed to do about it. Which emotions to focus on? How to activate them? And, more importantly, how to know when it’s happened? Problem is, emotional brand-building is far from a short term fix- it takes years to build up positive emotional associations and a lot of investment. Not a hugely enticing prospect for a hungry advertiser looking to make their mark!
Enter Behavioural Economics…
Read what the Mindworx Acadamy, led by BE luminaries such as Dan Ariely and Rory Sutherland, promises on their website:
“What if you could 3x, 5x or 7x your marketing results — systematically and repeatedly?
What if you could increase your prices while at the same time keeping happy customers for life?
And what if you could simply stop chasing the “next big thing” in marketing and instead have rapid, practical and step-by-step guidance, showing you what really works?
It’s very much possible. And you can do it too.”
Stirring stuff! It goes on:
“The truth is, most of what you’ve been pursuing in marketing is wrong. And way less reliable and effective than you’d wish.
And it’s all because of this tiny little fact: 90 to 95 % of purchase decisions happen subconsciously.
Do you know how to address the subconscious?
And that’s precisely why you’re having a hard time coming up with solid, replicable results. Because you focus on the wrong things. But — and this is important — you have no idea (yet) what kinds of results you could achieve if only you started to focus on the right things.
Yes, the things which could easily 3x, 5x, 7x (or more) your results... And Behavioral Economics is precisely what tells you how — and how you can use it to influence human decisions.”
It’s easy to see why this kind of rhetoric captured the imagination of many advertisers. It sounds simple; it sounds effective; and - most importantly- it panders to their vanity by putting them (back) in control.
One of the key tenets of BE is bounded rationality: Decisions are not always optimal; there are restrictions to human information processing, due to limits in knowledge and computational capacities (Simon, 1982; Kahneman, 2003). Not that we are irrational – at least not in the accepted sense of the word - but we are very inconsistent in our reasoning, which is why Kahneman uses the term in a highly specific way: for him, the only test of rationality is not whether a person’s beliefs and preferences are reasonable, but whether they are internally consistent.
The great appeal of BE is that it offers the prospect of managing bounded rationality. How? By exploiting the various heuristics and biases that limit our ability to make consistently rational choices.
Enticingly BE seems to offer marketers and advertisers a psychological "box of tricks" that allows them to influence specific behaviours. Most famously ‘nudging’ them in the direction of behaviours which might not otherwise occur. Indeed, it’s no coincidence that Rory Sutherland calls his annual festival of BE, ‘Nudgestock’.
I spoke recently to a strategy director of a leading comms agency who’d attended it. His verdict? “Well...we’ve been kicking round BE for a decade now, but where’s the evidence it actually works – at least for brands and advertising?. Where are the case studies?”
Now, his point is not that BE is useless; indeed, he accepted there’s evidence that certain behaviours can be modified and changed. Rather, he wanted to know what it told him about building brands – about making brands more attractive, resilient and sustainable over time. Surely this should be a, if not the, central purpose of marketing and advertising: building sustainable value for our clients, not just quick fixes that produce sales uplifts in the short term. Of course, any sales uplift’s fine, but, as Binet & Field argue in The Long and the Short of it (2013), successful brands need a combination of short term sales activation and long-term equity building.
So my question is: What does Behavioural Economics tell us about how to build brand value over time?